by Shawn Cumberbatch
Barbadians taking home the most money in the public and private sector are about to be caught in one of the widest income tax nets ever thrown by government.
And effective Sunday those earning $50,000 to $200,000 plus in gross income annually will also face penalties and interest if they pay the new temporary Consolidation Tax late.
Barbados TODAY understands some employers and business executives were taken by surprise today when the Inland Revenue Department officially gave them details of the new measure from which government hopes to raise $42.1 million as part of its austerity measures between now and March 2015.
No category of income will be left untouched by the new tax with salaries and wages, pensions, gratuities, tips, vacation pay, bonuses, various fees, honorarium’s and even non cash payments among the categories to be accounted for.
Indications today also were that while Minister of Finance Chris Sinckler announced specific rates for people being paid $100,000 to $200,000 plus, based on the information circulated by Commissioner of Inland Revenue Sabina Walcott-Denny government might receive less than it anticipated.
In correspondence captioned Inland Revenue Department Notice To Employers Consolidation Tax, the Commissioner said:
“Pursuant to the Financial Statement and Budgetary proposals of August 13, 2013 presented by the Minister of Finance, a temporary Consolidation Tax on the Gross Income of Individuals will be in effect from September 1, 2013.
“The Gross Income of an Individual represents the total income before deductions. It Includes all salary, wages, payment in lieu of termination notice, bonus, vacation pay, tips and gratuities, honorarium, director’s fee, management fee, commission, allowances, pension and any other payments made (in cash or kind) to an individual during the Income Year.
“Therefore with effect from September 1, 2013 you are required to deduct the relevant amount as applicable, on a monthly/weekly/daily basis and remit the same to the Department not later than the fifteenth of the month following the month in which the deduction was made. Penalties and Interest would apply for the late payment of tax,” she added.
Based on Sinckler’s statements, government is banking on raising $15.5 million between next month and March next year, and $26.6 million between April next year and March 2015 from the Consolidation Tax, after which it will be abandoned.
But while Sinckler said $100,000 to $200,000 gross income earners would be taxed at a rate of 2.5 per cent and those making more than $200,000 would have a 3.5 per cent rate, Inland Revenue differed, saying the rates would be a lesser two per cent for people paid $100,001 to $200,000 and three per cent for those earning $200,001 and over.
One senior private sector official said there needed to be clarity on these matters given the disparity in the budget and the Inland Revenue notice, and said “it acts as a disadvantage to people earning commissions and so forth because you may fall into a higher tax bracket and have all your income being taxed”.
“I am just surprised at the whole shebang. The bit that concerns me greatly is the one that says ‘and any other payments made in cash or kind’ to an individual during the income year. If somebody goes to the gym and the company pays and so forth why should that be covered? What about medical insurance? What about payments for your pension scheme? Currently those things like contributions to pension schemes are not subject to tax,” the official added.
“Vacation pay is something that’s accrued up to August 31, for time that you have spent in the business prior to the Budget. Why are you going to subject that income to tax now?”
Congress of Trade Unions and Staff Associations of Barbados President Cedric Murrell has already voiced concern about the Consolidation Tax, saying his organisation was “troubled by the impact that the temporary Consolidation Tax on gross income of persons earning $50,000 and over per annum will have on workers”.
“The Minister of Finance has promised that this tax will be in place for 19 months and hence the Congress expects that at the end of this period that the economy will be on a growth path and able to once again provide public workers with increases in salary,” he said, adding hoped government would honour pledge to end the tax after 19 months.
Gov't introduces plan to raise $42.1 million in a wide tax net - by Barbados Today August 27, 2013 Article by
Barbados Today Published on
August 27, 2013
August 27, 2013
by Shawn Cumberbatch